Fed Chairman: ‘We Now Understand Better How Little We Understand About Inflation’ | Eastern North Carolina Now | Federal Reserve Chairman Jerome Powell has reflected on why the economic experts failed to predict surging inflation, and his findings didn’t exactly imbue much confidence in those who heard them.

Coronavirus Disease 2019 (COVID-19)
    Publisher's Note: This post appears here courtesy of the The Daily Wire. The author of this post is Tim Meads.

    Federal Reserve Chairman Jerome Powell has reflected on why the economic experts failed to predict surging inflation, and his findings didn't exactly imbue much confidence in those who heard them.

    During the European Central Bank forum, host Francine Laqua asked panelists, "Hindsight is a beautiful thing, I know...but going forward...how do we need to look at inflation differently? So, for example, in the U.S. - the stimulus. Did we circulate the impact this would have on inflation?"

    "I think we now understand better how little we understand about inflation," Powel responded.

    The Bloomberg TV anchor responded with a chuckle, "That's not very reassuring."

    "No, honestly, this was unpredicted. I was looking at the time of our June meeting one year ago, of the 35 people who filed with a survey of professional forecasters, 34 of them had inflation below four percent for the last year. And of course, it was way above four percent."

    The exchange can be seen here:

    Powell also clarified that experts were using an outdated model to predict inflation.

    "So really, everyone had the same model - which was the Phillips curve model - and it just was not capable of producing high inflation. But what it was missing was something that's been completely missing in the data for 40 years, which is basically the collapse of the supply-side."

    "You know the U.S. economy is famously adaptable... and yet here they are," he continued. "So, what you had was very strong demand, but hitting effectively a vertical supply curve. So ordinarily when people want to buy cars - which they really did, because they didn't want to ride on public transportation, rates were low, they had all these savings - the car companies would make more cars and they might raise prices, too. In this case, they couldn't make as many cars so what you got was, straight up the vertical supply curve, a big price increase."

    Powell theorized that the process could happen in reverse and help lower inflation.

    The Consumer Price Index (CPI) rose 8.6% between May 2021 and May 2022, meaning that inflation surpassed record highs, according to the U.S. Bureau of Labor Statistics. President Joe Biden has blamed COVID-19, Russian President Vladimir Putin's invasion of Ukraine, MAGA-Republicans in Congress, and energy companies for soaring costs of goods.

    While inflation is a global problem, data from the Organization for Economic Cooperation and Development (OECD) shows that the United States boasts higher inflation rates than many other developed countries. The 8.3% inflation rate seen in the United States as of April was higher than the 7.8% rate in the United Kingdom, the 7.4% rate in Germany, the 6.8% rate in Canada, the 6% rate in Italy, the 4.8% rate in South Korea, and the 2.5% rate in Japan.

    Powell's comments in full can be seen here:


Go Back


Latest Op-Ed & Politics

Former President Trump on Wednesday claimed that the Department of Justice (DOJ) and the FBI had asked his legal team in early June to put an extra lock on the door to the room where boxes of documents reportedly marked as classified were stored.
To paraphrase Alice, who used the term to describe her adventures in Wonderland, election politics in America is getting “curiouser and curiouser.” North Carolina has been in the forefront of innovation and implementation
The trouble with socialism is that you eventually run out of other people's money
A key measure of inflation rose to a new 40-year high in June, according to new data, marking troubling news for Americans as the economy officially entered a recession on Thursday.
CDC Director Rochelle Walensky said during an interview on Sunday that “there is a plan” to get unvaccinated essential workers “education and counseling” so they will feel comfortable getting vaccinated.


N.C. Republican Congressional delegation outraged at FBI raid on former President Donald Trump's Mar-a-Lago home in Florida.
A federal magistrate judge has ordered the Department of Justice (DOJ) to respond to requests to make public the warrant authorizing the FBI’s unprecedented Monday raid of former President Donald Trump’s residence.
New Zealand Prime Jacinda Ardern smiled during an interview late last week when saying that she was effectively creating two different classes of people in her country that have different levels of freedom depending on whether they are vaccinated.
On Tuesday, Democrats filed an emergency motion to stay federal Judge James Dever’s decision last week to order the North Carolina State Board of Elections to place the Green Party’s candidates on the ballot.


Communist China threatened to shoot down Democrat House Speaker Nancy Pelosi’s (D-CA) plane on Friday if the 82-year-old lawmaker tries to visit Taiwan.


Back to Top